The capacity of embryonic stem (ES) cells to differentiate to hepatocytes in culture provides a unique model system to study alcohol-induced liver injury in vitro, and ultimately to provide large amount of mature hepatocytes for transplantation in liver failure due to chronic alcoholic liver disease. Liver develops from the gut endoderm along with other major organs including the pancreas, lungs, thyroid and intestines. The experiments outlined in the proposal build on previous observations that endoderm-derived hepatoblast-like cells can be efficiently and reproducibly induced in the mouse ES cell system and seek to translate the murine ES cell differentiation program to the human ES cell program"!. This application addresses questions relating to maturation of mouse ES-derived hepatoblast-like cells, to the endoderm induction in the human ES cell system and its specification to a hepatic fate and finally to mature human hepatocytes. Therefore, the ultimate goal of these studies is to develop a feasible approach to generate functional hepatocytes from mouse and human ES cells as an in vitro model to study alcohol-induced liver injury.